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Tina L. Saitone1 and Richard J. Sexton1,2

1
Department of Agricultural and Resource Economics, 2The Giannini Foundation of
Agricultural Economics, University of California, Davis, California 95616;
email: saitone@primal.ucdavis.edu, rich@primal.ucdavis.edu
Annu. Rev. Resour. Econ. 2010. 2:341–68 Key Words

First published online as a Review in Advance on asymmetric information, certification, horizontal differentiation,
June 9, 2010
labeling, producer organization, vertical differentiation
The Annual Review of Resource Economics is
online at resource.annualreviews.org Abstract
This article’s doi: This paper summarizes and evaluates recent research on food
10.1146/annurev.resource.050708.144154
product quality and differentiation, both key dimensions of modern
Copyright © 2010 by Annual Reviews. food markets. We emphasize the implications for modeling of viola-
All rights reserved
tion of the product homogeneity and perfect information axioms of
1941-1340/10/1010-0341$20.00 perfect competition and focus on issues that are important and/or
unique to agriculture. We first review modeling approaches for
studying competition in differentiated-agricultural-product markets
and then address research in the areas of product quality, labeling,
and certification. A unique aspect of agricultural industries is the
autonomy that they often have to engage in collective action and
self-regulation through producer-controlled marketing organizations.
We investigate the role of these organizations in influencing and
certifying product quality and in creating product differentiation.
341
INTRODUCTION
Microeconomics textbook writers continue to point to agricultural markets as examples of
competitive markets. However, in reality probably no agricultural markets are competitive,
especially in light of profound structural revolutions that dramatically increased concentra-
tion in the food manufacturing sector beginning in the mid-1960s (Connor et al. 1985) and,
somewhat more recently, in grocery retailing (McCorriston 2002, Reardon et al. 2003).
For the basic precept of a competitive market to hold, namely, that all buyers and sellers
are price takers, three conditions must be met:
All buyers and sellers must be small relative to the total size of the market, meaning that
there must be many of each.
The products of all sellers must be homogeneous in the eyes of buyers.
Information in the market place must be perfect so that all buyers and sellers are aware
of the prices being charged and the characteristics of the products being sold.
We are not aware of any modern agricultural market that meets all three of these
conditions. Most agricultural markets fail to meet any of them. For example, consider
the classic case of the wheat market offered by Pindyck & Rubinfeld (2009, p. 8):
“[T]housands of farmers produce wheat, which thousands of buyers purchase to produce
flour and other products. As a result, no single farmer and no single buyer can significantly
affect the price of wheat.” The U.S. Department of Justice (1999) might disagree because it
sued to prevent the merger of Cargill and Continental Grain Company, alleging that
“unless the acquisition is enjoined, many American farmers likely will receive lower prices
for their grain and oilseed crops, including corn, soybeans, and wheat.”1 Should the fact
that sales from the production of the thousands of farmers in Australia and Canada, the
second- and third-largest wheat-exporting countries, respectively, are in the hands of a
single state trader affect Pindyck & Rubinfeld’s assessment of competition in the wheat
market? Should the fact that wheat is a highly differentiated product, based upon protein
content and other factors (Wilson 1989, Lavoie 2005), alter their conclusion?
Although our textbook writers may have been slow to appreciate the competitive
landscape in modern agricultural markets, agricultural economists have long recognized
that competition issues are an important factor in agricultural markets.2 Sexton & Lavoie
(2001) summarized early work on industrial organization in agricultural markets. Much of
this work focused on structure and behavior in the food and tobacco manufacturing
sectors, culminating in the classic book by Connor et al. (1985). The study by Perloff &
Rausser (1983) was one of the first to focus on the asymmetric information dimension of
agricultural markets and the use of information by firms to increase their market power.
More recently, the focus of industrial organization research has been redirected to the role
of food retailers as both buyers and sellers (e.g., Li et al. 2006, Ellickson 2007), reflecting
the rapid displacement of traditional small food retailers by large international chains
almost worldwide (Reardon et al. 2003).
1
The merger ultimately was allowed to proceed, but only after the firms agreed to divest themselves of a number of
grain elevators (MacDonald 1999).
2
Even in the wheat market, authors have long recognized the potential for imperfect competition. McCalla (1966)
modeled world wheat trade as a U.S.-Canada duopoly; other trading countries constituted a competitive fringe. His
rationale was the presence of Canada’s state trader, the Canadian Wheat Board, and the use of export subsidies by
the U.S. government to determine trade flows.
342 Saitone Sexton

Reflecting the growing importance of industrial organization issues to agricultural
markets, a number of topics in the field have recently been surveyed. Sexton & Lavoie
(2001) provide a general survey, emphasizing static and dynamic approaches to modeling
and estimating market power. The survey of McCorriston (2002) focuses on the European
Union (EU) and the behavior of food retailers, including their use of strategic tools such as
vertical restraints, slotting allowances, and private labels.3
Sheldon & Sperling (2003) and Kaiser & Suzuki (2006) review empirical analyses
of market power in the food sector. Both studies emphasize research conducted within
the new-empirical-industrial-organization framework, as contrasted with the traditional struc-
ture-conduct-performance framework exemplified in the work of Connor et al. (1985).
Sarker & Surry (2006) and Reimer & Stiegert (2006) provide recent reviews of agricultural
applications of strategic trade theory (Helpman & Krugman 1985), a framework that
emphasizes product differentiation and imperfect competition. Reimer & Stiegert also
summarize empirical evidence regarding imperfect competition in agricultural trade.

An important and growing area of industrial organization research in agricultural markets

that has received less review and synthesis is work on product differentiation and quality
in the food system. The term quality may reference many dimensions of a food product,
including its taste, appearance, convenience, brand appeal, and healthfulness. In addition,
some consumers are increasingly valuing characteristics of the underlying production process
as differentiating quality attributes. Such considerations include types of inputs utilized or
avoided; the location of production, including country or region of origin (Carter et al. 2006)
and the “localvore” phenomenon (Ayres & Bosia 2008); implications of production for the
environment; treatment of animals; and fairness of marketing arrangements.
Given the many dimensions of product quality that are important in modern food
markets and the vast heterogeneity among consumers regarding the importance they
ascribe to specific product attributes, considerable opportunities exist for firms to achieve
meaningful product differentiation. But quality differences, product heterogeneity, and
brands are incompatible with the perfect competition axiom of homogeneous products.
If firms succeed in truly differentiating their products, they face individualized, downward-
sloping demand curves and are not price takers.
Furthermore, differentiation among firms and products in these various quality dimen-
sions leads inevitably to violation of the perfect competition axiom of perfect information
in many cases because various important differentiating attributes of food products, such
as the presence or absence of genetically modified organisms, ecological characteristics of
the production process, and treatment of animals, are not readily discernable by con-
sumers, even after consumption.
The goal of this paper is thus to summarize and evaluate recent work in food marketing
that studies product differentiation and quality issues. We emphasize the industrial organiza-
tion implications of violation of the product homogeneity and perfect information axioms of
the perfect competition model and focus on dimensions that are important and in some cases
unique to agricultural markets. Although key empirical results are mentioned, the main focus
is on conceptual modeling approaches to studying quality issues and product differentiation.
We first provide an overview to modeling approaches for studying competition in differ-
entiated product markets and then address research in the area of product quality labeling
3
Dobson et al. (2003) also chronicle the rising concentration and evolving procurement practices in EU food retailing
and consider the implications for other participants in the food chain and for economic welfare.
www.annualreviews.org Differentiation and Quality in Food 343

and certification. This work synthesizes theory on product differentiation and imperfect
information. A facet of industrial organization unique to agricultural markets is the auton-
omy given to producer organizations to engage in collective action and self-regulation. We
address the role of such organizations in influencing product quality, creating brand identi-
ties, and providing credible signals about product quality to the market.
MODELING PRODUCT AND QUALITY DIFFERENTIATION IN

FOOD MARKETS
Product differentiation models can be divided into two broad categories: address and
nonaddress models. A fundamental characteristic of address or location models is that
consumers purchase only one product (in addition to an outside good) from among the set
of products that is available. Competition in address models is localized. If several prod-
ucts, brands, or quality levels are under consideration, a given item competes directly only
with those located adjacent to it in the product characteristic space.

Address models in turn are of two basic genres: vertical differentiation models based
upon the seminal Mussa & Rosen (1978) model and horizontal differentiation models
following the classic work of Hotelling (1929). In horizontal differentiation, consumers
do not agree on a preference ranking among the available products in the model, whereas
in vertical differentiation, consumers share the same ordinal ranking but differ as to the
intensity of their preference for higher-ranked products.4
Differences in objective qualities of agricultural products (e.g., size, color, and extent of
blemishes) normally fit in the realm of vertical differentiation, as would differentiation
according to the presence or absence of inputs such as pesticides and genetically modified
organisms (GMOs). The classic example of location-based horizontal differentiation is
geographic space and the physical location of sellers relative to buyers who are distributed
in space. Other examples are situations in which consumers disagree as to the desirability
of a product attribute, such as sugar content in cereals and bakery products, fat content of
milk, and protein content of wheat.
Competition is not localized in product differentiation models outside of the address
realm. Goods differ in their attributes, and consumers can purchase multiple varieties of a
product. Such models follow the tradition of Chamberlin (1933), and often in direct con-
trast to address models, consumers exhibit an “insatiable taste for variety” (Lancaster 1990,
p. 193), consuming a positive amount of every product in the category under study.
Address models thus work best when in a given time period a consumer purchases only
one product from a narrowly defined product category. Conversely, nonaddress models are
appropriate in market settings in which a particular brand or product type competes with
all products in the category and consumers typically purchase multiple products from
within the category. Thus, such models are appropriate to study product differentiation
when the relevant product market is broadly defined.5 The choice between an address
4
Recent reviews of horizontal and vertical differentiation address models, with a focus on food marketing and
consumption, are provided by Mérel & Sexton (2010) and Giannakas (2010), respectively.
5
For example, a meat product such as chicken is today differentiated according to characteristics such as naturally
grown, organically grown, and range free. It is reasonable that a consumer will purchase only one type of chicken,
depending upon how he evaluates these differentiating attributes and relative prices. However, a broader analysis
that encompassed different types of meats would require a model that allowed consumers to select a variety of
products.
344 Saitone Sexton

model and a nonaddress model also hinges on the research question at hand. Address
models are needed when the research question involves positioning of a product or brand
relative to competition, not simply when there is a question of whether a firm or brand will
enter the market.
Address Models of Product Differentiation

In the canonical vertical product differentiation model (Mussa & Rosen 1978), the
demand side of the market is characterized by a continuum of consumers who are dis-
tributed uniformly with density D according to their taste for quality y, where y 2 [a, b].6
Consumers purchase at most one unit of a product in the category. In equilibrium, con-
sumers with higher valuations for quality (or higher incomes) purchase a product with
a high-quality rating, whereas consumers with lower valuations of quality purchase

lower-ranked products or do not purchase in the category at all. A consumer with taste
parameter y has utility U(y, qi) ¼ yqi and consumer surplus CS(y, qi, Pi) ¼ yqi Pi from
purchasing a unit of a good with quality qi and price Pi.
There are n 2 price-setting firms in the market; each produces one product in the
category. If two or more firms produce products with identical qualities, they fall victim to
Bertrand’s paradox, with price in equilibrium equal to marginal cost. Thus, firms always
choose different qualities, have different costs, and charge different prices; all prices exceed
marginal cost. Therefore, there is no loss in generality to index the firms by the quality
levels of their products, i ¼ 1, 2 . . . n. Accordingly, firm i produces a unit of good of quality qi
at a cost of c(qi), where c0 (qi) > 0 and c00 (qi) 0. A common cost specification is the
quadratic cðqi Þ ¼ q2i =2.
The location of the indifferent consumers determines the demand for the vertically
differentiated products. Assume for simplicity a duopoly structure with two quality levels,
high (H) and low (L). To find the location, y, of the consumer who is indifferent between
H and L products, we equate the consumer surplus from purchasing the H product with
the surplus from purchasing the L product:
PH PL
yqH PH ¼ yqL PL ) y ¼ :
qH qL
All consumers with y > y strictly prefer to purchase the H product.

The location, y, of the consumer indifferent between consuming L and nothing at all,

assuming the market is not covered, is found by equating consumer surplus derived from
consuming the L product with zero:
PL
yqL PL ¼ 0 ) a < y ¼ :
qL
All consumers with a y < y will not purchase any product in this category.

6
An alternative interpretation is that consumers have identical tastes but are distributed uniformly according to their
income level, y, along an interval y 2 [a, b], a > 0 (Shaked & Sutton 1982). This interpretation has appeal from a
comparative static context because changes in b represent income growth and the magnitude of b relative to a is a
measure of income distribution.

After the location of the indifferent consumers is established, the demands for the firms
producing H and L can be determined. Setting D ¼ 1 via normalization, we have
PH PL
DH ðPH , PL jqH , qL Þ ¼ b
y¼b
qH qL
PH PL PL : ð1Þ
DL ðPH , PL jqH , qL Þ ¼
yy¼
qH qL qL
Generalization to more than two products and qualities is straightforward.

For issues of food quality, certification, and labeling, what happens if consumers cannot
tell the H product from the L product is critical. They will then have no choice but to
ascribe an average quality to any product on the market on the basis of their knowledge of
the probabilities of each type being on the market. Suppose dH is the probability that a unit
¼ dH qH þ ð1 dH ÞqL is the average quality on
of product is H (e.g., GMO free). Then q

the market, and the indifferent consumer is located at y~ ¼ P= q, where P is the pooled
price, and pooled demand is

P,
Dð Þ ¼ b y~ ¼ b ðP=
q qÞ: ð2Þ
The producer of the L product benefits from this pooling equilibrium, but the H producer,
consumers, and overall welfare are harmed.7
Several food quality studies modified this standard specification. For attributes such as
the presence of a GMO (Giannakas & Fulton 2002) or hormones in beef (Bureau et al.
1998), we can array consumers uniformly along an interval, e.g., c 2 [0,1], in terms of
the disutility they attach to the presence of the attribute in their food. Then indirect utility
of the traditional product is simply UT ¼ U PT , whereas for the modified product it is
UM ¼ U PM lc, where l is a nonnegative utility discount factor that measures intensity
of preference regarding the food modification (Giannakas & Fulton 2002).
The standard assumption of uniform distribution of consumers is strong and probably
unrealistic for many food market applications, for example, those involving the presence or
absence of a trait such as a GMO (Crespi & Marette 2003a). A sensible generalization that
involves little sacrifice in mathematical tractability is to classify consumers into types as to
their preferences for the differentiating attribute, in essence creating a mass point in the
distribution function. For example, ecological characteristics of a production process, fair-
ness of trade, and treatment conditions of animals may matter greatly to some consumers and
not at all to others in the sense that the latter consumers are unwilling to pay anything extra
for product containing such attributes. Those who do not care (type I) compose 0 < a < 1
share of the population, and those who do care (type II) can be distributed on the basis of the
intensity of their preferences according to the Mussa-Rosen framework.
Vertical differentiation models generally evolve over two or more sequential stages. The
final stage is price competition among the firms, given demands as described in Equation 1
and fixed quality levels.8 The penultimate stage is the choice of quality levels, made in
rational anticipation of the equilibrium from the subsequent price competition. As we
7
An immediately interesting result is that total producer welfare, defined as the sum of welfare for H and L pro-
ducers, may be higher or lower in the pooling equilibrium compared with the equilibrium when qualities are known.
8
Valletti (2000) shows that the system of demand equations, defined in Equation 1, can be inverted to its quantity-
dependent form such that stage 2 can be characterized by quantity (Cournot) competition.
346 Saitone Sexton

argue subsequently, modeling quality choices for agricultural products presents interesting
issues because, unlike for, e.g., a manufacturing application, quality of foods is determined,
at least in part, by natural forces. An additional stage of the model, if any, will usually
feature a policy choice intended to condition the subsequent competition. Examples are
decisions as to imposing a minimum quality standard (MQS) or levying subsidies or taxes
on investments in product quality (Zhou et al. 2002).
Horizontal differentiation models in the tradition of Hotelling (1929) share many
similarities with the vertical differentiation model of Mussa & Rosen (1978). In fact, most
versions of the Hotelling model are a special case of a vertical product differentiation
model, making their primary difference one of interpretation (Cremer & Thisse 1991).
To reinterpret the Mussa-Rosen model in a horizontal differentiation context, we rede-
fine the interval [a, b] to represent the salient (purchase-inducing) characteristic in a
product category.9 Consumers are distributed uniformly along this space, and their density
can be set to 1.0. Thus, a consumer with location y 2 [a, b] obtains utility Uðy, qi , tÞ ¼
U0 tjy qi j and surplus CSðy, qi , t, Pi Þ ¼ Uðy, qi , tÞ Pi if she purchases a unit from

seller i defined by location qi 2 [a, b] and price Pi. Here t is the consumer’s cost of traveling
from her desired location to purchase the product. Thus, t can represent transportation
costs in the case of geographic differentiation, or it can represent the disutility from
consuming, e.g., a breakfast cereal with sugar content qi that is not the consumer’s ideal
content y.10
As in the Mussa-Rosen model, we can consider n 2 price-setting firms in the
market. However, unlike in the Mussa-Rosen framework, all sellers’ products in the
Hotelling model are located in the same interval as the buyers are located. Furthermore,
because there is no agreed-upon quality ranking in the horizontal differentiation case, a
common simplifying assumption is that all sellers’ costs are identical, in which case it
is a small additional step to assume that those costs are constant per unit and equal
to zero.11
As with the Mussa-Rosen model, firm demands are found by identifying the indifferent
consumer, if one exists.12 Consider the prototype duopoly version of the model with firms
9
The simplest and most common interpretation is that products are differentiated according to only one character-
istic, e.g., the geographic location of the sellers. The interpretation can often be generalized to two characteristics,
as Lancaster (1990) notes, with [a, b] denoting an index of the relative amounts of the two characteristics, e.g.,
nutritional content and sugar content of breakfast cereals. However, an even broader interpretation is possible on the
basis of work by Tabuchi (1994) and Irmen & Thisse (1998), who show that when products are defined by multiple
characteristics, under quite general conditions firms will differentiate according to only one characteristic (the most
salient) and will choose a common, midpoint location for the other characteristics.
10
Quadratic transportation costs are often used as an alternative to the linear costs shown here and make sense,
especially in the case of travel in product characteristic space. Quadratic transportation costs play an important role
in guaranteeing the existence of equilibrium in the game to determine firms’ locations in the product space [a, b]
(d’Aspremont et al. 1979).
11
Food markets, however, provide examples for which this assumption is inappropriate. Xia & Sexton (2009) study
markets with horizontal differentiation and differential costs. This case, which they apply to fluid milk and butterfat
content, results when there is a clear cost-of-production ranking for the differentiating attribute, milk butterfat
content in their example.
12
An indifferent consumer may not exist for either of two reasons in some specifications of a Hotelling model. First,
if consumers’ disutility cost, t, is large relative to the base utility, U0, from consuming the product, consumers located
near the midpoint between firms’ locations may not consume the product at all—i.e., the market is not covered—and
firms act as local monopolies. Second, one firm may undercut the other’s price by a sufficient amount to steal
its entire market. Indeed, this market-stealing phenomenon causes nonexistence of equilibrium in the two-stage
location-then-price game when consumers’ transportation costs are linear (d’Aspremont et al. 1979).

located at the market endpoints a and b.13 An indifferent consumer attains the same
indirect utility from consuming either a’s product or b’s product:
CSðy, qa , Pa Þ ¼ CSðy, qb , Pb Þ ) U0 tjy aj Pa ¼ U0 tjy bj Pb : ð3Þ
Solving for y yields y ¼ ½Pb Pa þ tða þ bÞ=2t as the location of the indifferent consumer,
in which case firm demands are
Da ðPa , Pb , tÞ ¼ ½Pb Pa þ tðb aÞ=2t
: ð4Þ
Db ðPa , Pb , tÞ ¼ ½Pa Pb þ tðb aÞ=2t
Similar to the Mussa-Rosen model, applications of the Hotelling (1929) model will nor-
mally involve two or more stages of competition. The final stage represents the pricing
game, given firms’ locations and demands such as in those in Equation 4; the penultimate
stage involves choice of location (Hinloopen & van Marrewijk 1999); and any prior stage
represents a policy choice designed to influence firms’ subsequent behavior.

A key limitation of Hotelling’s (1929) “linear city” is that the market’s endpoints create
an asymmetry among firms once n 3. A solution is the “circular city” (Salop 1979),
wherein firms locate along the rim of a circle. Here symmetry can be maintained among
firms as entry occurs, and hence this version of the horizontal differentiation address model
is used commonly to study entry decisions such as the introduction of new products.
A problem, however, is that new products have no market-expanding effect. Entry can still
improve consumer welfare by enhancing price competition and reducing transportation
costs, although this is not always true (Cowen & Yin 2008).
The spokes model of Chen & Riordan (2007) avoids the localized competition aspect of
a Hotelling model. Entry has a market-expanding effect and does not require (implicitly)
the relocation of firms, as in Salop’s (1979) circle model. Consumers are distributed
uniformly on a network of spokes, and each firm produces a single brand located at the
endpoint of a spoke. Because entry implies a new spoke and thus new consumers, new
brands have a market-expanding effect. For simplicity, consumers are assumed to consider
only one alternative brand (with equal probability) in addition to the brand on their spoke,
making competition nonlocalized.
Nonaddress Models of Product Differentiation

In the standard rendering of Chamberlin’s (1933) model of monopolistic competition,
there is a fixed total demand for products in the category that is divided among however
many products are offered. Each firm produces one product with a technology that exhib-
its economies of scale. Entry is free, so equilibrium is attained when profit-maximizing
firms earn zero profits. Firms reach the zero-profit point by operating where marginal
revenue equals marginal cost at the point where their downward-sloping demand function
is tangent to their average cost curve, yielding the famous and misleading result of exces-
sive product differentiation from a welfare maximization perspective because the available
economies of scale are not exploited.
13
Location at the endpoints is the equilibrium location for a broad class of Hotelling duopoly models (e.g., when
consumers have quadratic transportation costs) and is known as the principle of maximum differentiation
(d’Aspremont et al. 1979).
348 Saitone Sexton

The result is misleading because no welfare is ascribed to the variety of products
produced in the market. This omission was corrected in a seminal paper by Dixit & Stiglitz
(1977), who developed a general equilibrium model in which utility for a representative
consumer was expressed as a separable function of an outside good, x0, and a group of
related products denoted as x ¼ (x1, x2, . . . xn). The subutility for the related goods is of the
constant elasticity of substitution (CES) form:
0 " #1=r 1
X n
U ¼ u@x0 , xri A:
i¼1
Each firm produces one product and maximizes profit by equating marginal revenue
(assuming all competitor prices are constant) with marginal cost. New firms (brands) enter
until profits are zero, as in Chamberlin’s (1933) model. Here market equilibrium involves
too little variety relative to the unconstrained social optimum but is identical to the
second-best social optimum, wherein firms’ profits are constrained to be nonnegative and
lump-sum transfers are not possible.
Neither the Chamberlin (1933) model nor neo-Chamberlin models such as that of
Dixit & Stiglitz (1977) are useful for studying questions of strategic product introductions
and location in the product space because potential entrants’ only decisions are whether
or not to enter (yes, if expected profits are positive). There is no location decision—a share
of the fixed demand is allocated automatically in Chamberlin’s model, and the utility
function is augmented and a new demand created in Dixit & Stiglitz’s model. The same
limitation applies to subsequent models such as Perloff & Salop (1985) and Hart (1985),
which develop means to overcome the insatiable-taste-for-variety aspect of the Dixit &
Stiglitz model.
An approach that in essential ways merges the address and nonaddress approaches was
developed in a series of papers by de Palma et al. (1985), Anderson & de Palma (1988),
and Anderson et al. (1989a,b), who adapted the stochastic utility formulation of the logit
model (McFadden 1973) to characterize utilities of consumers located along Hotelling’s
line. Consider the indirect utility function for the Hotelling (1929) model from Equation 3
for a consumer with location y who purchases from firm i: CSi ðyÞ ¼ U0 tjy qi j Pi .
Augment utility as follows: Vi ðyÞ ¼ CSi ðyÞ þ mei , where m is a positive constant that
measures heterogeneity in consumers’ tastes and ei is a random variable with zero mean
and unit variance. Firms’ demands are now probabilistic and can be specified via the
logit model if the ei are assumed to be identically and independently Weibull distributed.
This adaptation causes overlapping market areas in the characteristic space, which
seems realistic, and also avoids discontinuities in demand that cause nonexistence-of-
equilibrium problems in firms’ location decisions in the Hotelling model with linear
transport costs.
FOOD PRODUCT QUALITY, CERTIFICATION, AND LABELING

Empirical studies have demonstrated consumers’ incremental willingness to pay for
specific product attributes such as organic (Govindasamy & Italia 1999, Kiesel & Villas-
Boas 2007), pesticide free (Misra et al. 1991), produced with sustainable practices
(Teisl et al. 2002), produced in particular geographic locations (Loureiro & Hine 2002,

Loureiro & Umberger 2003), safe (Golan & Kuchler 1999), and marketed under fair-trade
practices (de Pelsmacker et al. 2005, Loureiro & Lotade 2005, Rousu & Corrigan 2008).14
These value-adding and differentiating product characteristics of modern food markets
introduce important asymmetric information issues, which represent violations of the
axioms for a competitive market. In the presence of asymmetric information about product
quality, uninformed consumers base purchase decisions on average quality—a pooling
equilibrium, as described in Equation 2. However, contrary to the specification in Equa-
tion 2, sellers with H goods (and higher costs) may exit the market or revert to producing
L products because consumers are unwilling to pay for goods that are above-average
quality. The withdrawal of such sellers causes the average quality of products in the market
and, accordingly, consumers’ willingness to pay to decline. In its severest forms, the lemons
problem (Akerlof 1970) can lead to an equilibrium in which either only the lowest-quality
product is traded or, if quality is distributed continuously instead of discretely, no trade
takes place. However, if sellers are able to credibly signal quality to buyers, a separating
equilibrium results, as depicted in Equation 1, wherein quality of products is known and

equilibrium prices are differentiated accordingly (Spence 1973). Such equilibria are effi-
cient relative to pooling equilibria.
In considering how information problems for food products can be resolved, classifica-
tion of products according to whether and how consumers can acquire information as to
their characteristics is useful (Nelson 1970, Darby & Karni 1973). Search attributes are
quality dimensions that can be ascertained prior to consumption. Experience attributes are
product traits wherein consumers must consume the good to ascertain quality, and cre-
dence attributes are those that cannot be discerned directly by the consumer, even after
consumption.
Important attributes of food products fit into each of these categories. Size, shape, color,
and blemishes are search attributes about which consumers can thus be assumed to have
perfect information at the time of purchase (Bockstael 1984). Attributes such as taste,
texture, and perishability are experience attributes. Most of the emerging value-adding
attributes mentioned at the outset of this section are credence attributes.
Various forms of certification have been designed to alleviate informational asymmetries
between producers and consumers such that experience or credence attributes are trans-
formed to search attributes (Caswell & Mojduszka 1996). Warrantees, reputation in a
repeat-purchase setting, and guarantees may be effective tools for H sellers to generate
separating equilibria for experience goods (McCluskey 2000).15 However, credence attri-
butes pose a larger challenge for producers and industries attempting to certify quality.
14
For example, Kiesel & Villas-Boas (2007) find average incremental willingness to pay for organic milk of $0.23 per
gallon, Loureiro & Umberger (2003) report mean willingness to pay of $1.53 per pound for steak and $0.70 per
pound for hamburger for the COOL designation of U.S. certified beef, and Rousu & Corrigan (2008) report mean
willingness to pay of $0.24 for 3.5 oz. of fair-trade chocolate. The mean willingness to pay may also not be the most
relevant statistic because some consumers do not value these attributes, and these niche markets can target those
with the highest willingness to pay.
15
Marette et al. (2000) provide an example of reputation building, treating food safety as an experience attribute.
Food is modeled as either harmless (H) or harmful (L) in a standard Mussa-Rosen specification. In the first period,
consumers perceive the probability of the product being safe as l 2 [0,1], and willingness to pay is conditioned upon
this probability (i.e., the equilibrium is pooling). After consumers gain experience with the product in stage one, they
make a repeat purchase in the second stage if the product was safe in the first stage, creating an incentive for the
producer to put forth costly effort to improve safety. In the first stage of the model, a seller must choose a price
strategy to induce either a pooling equilibrium or a separating equilibrium. In this reputation-building setting, a low
introductory price signals that the firm is not a fly-by-night that produces L product.
350 Saitone Sexton

Depending upon the attribute at issue, labeling, certification, and grading/testing are
potential mechanisms for firms or industries to provide information regarding credence
attributes to consumers.16 However, credence quality claims by individual firms in the
absence of a verification or enforcement mechanism would not normally be credible. Such
claims constitute “cheap talk” (Farrell 1993). Although cheap talk can convey information
credibly in some settings (Farrell & Rabin 1996), food products believed to have a cre-
dence attribute command a price premium from some consumers, and because the truth
cannot ultimately be discerned by definition, there is no penalty, such as loss of reputation,
for lack of truthfulness (Bureau et al. 1998). Thus, self-certification cannot in general
achieve a separating equilibrium for credence attributes (Roe & Sheldon 2007).
Giannakas (2002) and Giannakas & Fulton (2002) demonstrate the effect of untruthful
labeling for organic products and GMO products, respectively, using a Mussa-Rosen
framework. When mislabeling is not possible, the introduction of labeling creates a sepa-
rating equilibrium in which a product’s type is known and consumer welfare increases.
Mislabeling is introduced through a probability, d, that the label is false. Welfare loss
increases in d, for large-enough d a pooling equilibrium ensues, and the H (organic or
non-GMO) product is driven from the market because it is too costly to produce without
an offsetting price premium.
Alternatives to self-certification include testing and certification by independent testing
firms (Hatanaka et al. 2005), also known as third-party certification (TPC); by producer
organizations such as protected designations of origin (PDO) (Zago & Pick 2004) and U.S.
federal or state marketing orders (Chalfant et al. 1999); or by government (Roe & Sheldon
2007). TPC firms in principle do not have a stake in the outcome of the transaction and
thus may have more credibility than do individual firms certifying their own production
(Golan et al. 2001). However, such a market-based solution to the certification problem
suffers from obvious limitations. The independence and competence of the third-party
certifier must be established for the certification to be credible in consumers’ minds.17
Moreover, there must be agreement as to the standards that the certifier is evaluating,
meaning that either government or self-regulating industry boards must first be involved
to set those standards.18
Roe & Sheldon (2007) provide a comprehensive analysis of labeling of credence attri-
butes in the presence of both government and TPC. Their work emphasizes the strategic
importance of various policy dimensions of labeling: (a) continuous labels, denoting the
quantity of an attribute present in a product, such as nutritional content, versus discrete
labels denoting the presence or absence at a threshold level of an attribute such as a GMO;
(b) voluntary versus mandatory labeling; and (c) exclusive certification (provided solely
by the government) versus nonexclusive certification, wherein firms may seek to certify
16
Ecolabels provide a prominent example. Ecolabels for seafood (Gudmundsson & Wessells 2000), shade-grown
coffee (Larson 2003), bird friendly, and green seal are now often seen at food retail outlets. Kirchhoff (2000)
considers green product characteristics and how their credence nature creates overcompliance by producers in the
face of asymmetric information.
17
This has led to the emergence of organizations to certify the certifiers, such as the Registrar Accreditation Board
(Deaton 2004).
18
Crespi & Marette (2001) point to possible market power of private certifiers as another source of market failure.
Set-up costs to provide certification may be high, meaning that the industry structure for certification involves few
suppliers, who would charge monopoly prices for their services.

standards through TPC beyond those that the government mandates. Such private certifi-
cation is assumed to be credible in the eyes of consumers.
Although results of the many cases Roe & Sheldon (2007) study through the various
possible combinations of a–c above are not easily summarized, the sensitivity of equilibria
regarding qualities offered in the market place, prices, and consumer welfare to the alter-
native certification regimes demonstrates the complexities of certification regulations.
Quality distortions relative to the perfect information equilibrium benchmark can emerge
under discrete labeling. Poorly chosen, mandatory discrete labels can drive the H product
from the market, with attendant welfare loss. Voluntary public standards may be ignored
by firms in favor of implementing privately certified standards set at the firms’ ideal levels.
In fact, redundant labeling through both public and private certifiers can emerge if the
government standard is mandatory but not exclusive.
Zago & Pick (2004) investigate the role of producer organizations in the creation of a
differentiated product market via certification. Consumers have Mussa-Rosen preferences,

and firms produce credence goods that are either H or L. Credible certification enables
the market to achieve a separating equilibrium. In competitive separating equilibrium, the
consumer surplus and the producer surplus of the H producers increase relative to the
pooling equilibrium, whereas the surplus of the L producers declines. However, if
the H producers must pay the fixed costs of the certification, as Zago & Pick assume,
socially beneficial certification may not be adopted because the surplus gain may not cover
the fixed costs. Even if certification is achieved, producers may lose on net because the
losses to the L producers exceed the H producers’ gains net of the fixed cost.
Thus, development and certification of socially beneficial H products may not
take place in a competitive market because competition dissipates the surplus from such
innovations so that returns may not cover the upfront costs associated with introducing
the product and certifying its credence (Marette & Crespi 2003, Zago & Pick 2004,
Lence et al. 2007). This opens the door to possible net welfare enhancement from allowing
producers to collectively exercise monopoly power through producer organizations such
as PDO to reduce the supply and to increase the profit flow from introducing and certifying
H products. Notably, reducing the supply of the H product increases market share
and price for the L product, obviating losses to L producers from the separating equilib-
rium. Consumers, too, may gain relative to a no-regulation pooling equilibrium if
the market power enables new products to be introduced (Lence et al. 2007) or allows
the quality-revealing separating equilibrium to occur (Marette & Crespi 2003, Zago &
Pick 2004).19
The question arises as to how food quality certification should be financed and
who should bear the costs depending upon the certification cost structure.20 Such decisions
have strategic importance, as Crespi & Marette (2001, 2003b) have demonstrated.
19
Bureau et al. (1998) use a similar vertical differentiation framework to show that trade liberalization can cause
consumers’ informational asymmetries to be exacerbated, affect consumers’ perception of quality, and cause a
decline in demand, leading to an overall welfare loss. They apply the model to hormone-treated and hormone-free
beef. In an autarkic equilibrium, EU consumers know that all beef is hormone free due to local regulations. Welfare
may be improved by introducing hormone-treated (L) beef from the United States if information is perfect, but if
trade regulations do not allow labeling as to content or country of origin, a pooling equilibrium will ensue on the
basis of the expected quality.
20
MacDonald et al. (1999) provide a survey of financing of public grading and certification services around the
world.
352 Saitone Sexton

Crespi & Marette (2001) demonstrate the virtues of per-unit fees on producers as a way to
foster competition among H sellers regardless of whether certification costs are fixed or
variable per unit. Bertrand equilibrium under a fixed certification fee would involve a
single H seller because two or more sellers would earn losses under the Bertrand
marginal-cost-pricing equilibrium.
Crespi & Marette (2003b) augment the Mussa-Rosen framework to study who should
bear the costs of discrete labeling, such as denoting the presence or absence of GMOs.
Consumers are distributed according to y 2 [0,1] in terms of their taste for quality but
differ in their attitudes toward GMOs. Type I consumers are indifferent between the GMO
and non-GMO products, whereas type II consumers always prefer non-GMO products at
identical prices.
The objective quality, q, is the same for both goods. Both consumer types are willing to
pay yq for the non-GMO product. Type I consumers are also willing to pay yq for the
GMO product, whereas type II consumers are willing to pay ymq for GMO products,
where m 2 [0,1) such that yq(1 m) is the price premium that type II consumers are willing
to pay for non-GMO products. Thus, although m is a common parameter for type II
consumers that measures intensity of preference for the non-GMO product, its interaction
with y generates a continuous distribution of willingness to pay among type II consumers
for the non-GMO product relative to the GMO product.
The constant marginal costs of GMO and non-GMO products are cg and cn,
respectively, where cn > cg ¼ 0. Production is competitive, and producers of both
GMO and non-GMO products earn zero profits. Due to the informational asym-
metries, no producer would produce the costlier non-GMO product without credible
certification.
Certification costs are variable, and labels may be of two types: does contain (DC) or
does not contain (DNC). When the DC label is used, GMO producers are responsible for
paying the labeling cost of s per unit that they pass on to GMO consumers, who pay price
pg ¼ s. If the labeling cost is high enough (s > cn), the DC requirement eliminates the GMO
product from the market.21
Under DNC certification, non-GMO producers pay the labeling cost. Type I con-
sumers will never buy non-GMO products.22 If cn þ s < q(1 m), then some type II
consumers will purchase the non-GMO product. Otherwise the regulation will eli-
minate the non-GMO product from the market. Certification can have unintended
welfare consequences because, depending upon who bears the certification cost, the sepa-
rating equilibrium may entail loss of either the H (non-GMO) product or the L (GMO)
product, although the pooling equilibrium necessarily involves loss of the non-GMO
product.23
21
Gruère et al. (2008) obtain a similar result in a model with market intermediaries. Mandatory labeling of GMO
products may cause processors to use only non-GMO ingredients, thereby eliminating GMO products from the
market and reducing consumer choice.
22
Because type I consumers are indifferent between GMO and non-GMO products, their welfare changes inversely
with price and is affected by labeling only to the extent that labeling affects equilibrium prices.
23
Desquilbet & Bullock (2009) also investigate who pays the costs and who benefits from maintaining a separate
market for GMO products. Using a nonaddress formulation, the authors consider a single (pooled) market splitting
into two: GMO and non-GMO. The welfare impacts for consumers and farmers are ambiguous in this model, and
sorting them out is left as a subject for empirical research.

ROLE OF PRODUCER ORGANIZATIONS IN THE PROVISION OF
QUALITY AND PRODUCT DIFFERENTIATION
Many countries provide a legal framework to enable farmers to engage in collective action
and self-regulation through producer-controlled marketing organizations (PCMO). In the
United States, marketing orders operating with either federal or state authorization allow
producers of a given commodity in a defined geographic area to act collectively to fund
research and advertising (Kaiser et al. 2005), regulate volumes (Cave & Salant 1995, Filson
et al. 2001), or impose MQS (Bockstael 1984). In Europe, PDO and protected geographic
indicators (PGI) provide a framework for producers to agree upon and certify product
specifications to create a differentiated product (Requillart 2007).24 State-trading enter-
prises (STE), which operate in many countries, have the statutory authority to act as
exclusive agents for home-country producers in export markets and also to impose
product requirements intended to create product differentiation (Ackerman et al. 1997,

McCorriston & MacLaren 2005).25 Finally, producer-owned marketing cooperatives are
ubiquitous throughout the developed and developing world (van Bekkum & van Dijk
1997, Trewin 2004, Deller et al. 2009).
Collectively, these organizations are extremely diverse in the functions that they per-
form and the legal infrastructure that supports their operation. Their unifying theme is the
promotion of producer welfare through collective action. Collective action is generally
subject to free ridership, so one key role for government is to make participation manda-
tory. This happens in STE through their single-desk selling authority and in U.S. marketing
orders because their provisions, when implemented voluntarily by a supermajority of
farmers in the designated region, become binding upon all producers in that region. In
contrast, PDO and PGI are voluntary because producers can choose whether to participate
but must comply with all regulations of the organization if they do join. Although the legal
framework governing marketing cooperatives varies widely across countries, participation
is voluntary, and legal restrictions on cooperatives in Europe give farmers great flexibility
to freely enter or exit a cooperative.
We focus here on the role of PCMO in regulating and certifying quality and in creating
product differentiation.26 Specific approaches among PCMO in pursuing these goals vary
greatly and include the use of certification and labels (Zago & Pick 2004), setting of grades
(Chalfant et al. 1999), imposition of MQS (Bockstael 1984, Saitone & Sexton 2010), and
regulation of inputs and/or production practices (Lence et al. 2007, Mérel 2009). PCMO
24
PDO require the production of the raw material and all stages of the production process for the finished product to
be conducted in the designated area of origin. The PGI designation requires that at least one stage of the production
process take place in the designated area. Both PDO and PGI are able to set geographic limitations, production
restrictions, and codes of practice to ensure the quality and consistency of their production. More than 750 European
products are registered under PDO, PGI, or traditional specialty guaranteed (TSG) status (European Union 2008).
The most frequent product categories covered by protected designations are cheeses and vegetables and fruit.
25
Dong et al. (2006) indicate that 32 countries had notified the World Trade Organization regarding 96 agricultural
organizations operating as STE.
26
Some research also suggests that certain PCMO programs can be detrimental to firms’ attempts to differentiate
their products. Crespi & Marette (2002) used the Mussa-Rosen framework with one branded producer and n 1
unbranded producers to study PCMO-funded generic advertising. Quality levels are a function of own advertising
(for the branded product) and generic advertising for both branded and unbranded products. Generic advertise-
ments, by promoting the message that all products are equally good, are detrimental to firms’ attempts to differen-
tiate, in which case generic advertising intensifies price competition and is detrimental to profits of the differentiated
firm. Multiple undifferentiated firms always earn zero profits in this model, but advertisements that reduce product
differentiation could reduce profits of both H and L sellers in a duopoly model.
354 Saitone Sexton

have been subjected to considerable criticism for their collective actions when those actions
are viewed through the prism of a competitive market,27 but recent work provides a more
nuanced and generally more positive view of such activities when they are studied in a
differentiated product framework (Marette & Crespi 2003, Zago & Pick 2004, Lence et al.
2007, Moschini et al. 2008).
Lence et al. (2007) use the term geographically differentiated agricultural product
(GDAP) to refer to producer organizations that have the authority to define quantity and/
or quality characteristics of the products produced under their auspices, and these
researchers study the formation of PCMO of this genre. Producers first decide whether to
develop a GDAP by comparing the net benefits associated with this designation relative to
producing a homogeneous commodity at constant price. If producers elect to develop a
GDAP, they incur a fixed investment cost and establish the type of GDAP that yields the
greatest producer benefit, given the legal and institutional framework. The authors do not
model the demand creation process. The GDAP simply has a downward-sloping demand
curve generated through a nonaddress utility specification, and producers are then
assumed to maximize profits subject to the restrictions of the GDAP established in the
previous stage.
In addition to specifying quality characteristics, GDAP organizations have direct or
indirect means to regulate production through restrictions on technologies or the regula-
tion of inputs, including land allocations, thereby enabling them to exploit the market
power inherent in the downward-sloping demand curve. However, a key message of Lence
et al. (2007) is that delegating cartel powers to producer organizations can enhance overall
welfare because new products introduced through PCMO may increase consumer and
social welfare, yet fail to achieve commercial viability in a competitive market because the
income stream is insufficient to recover the fixed costs of developing and marketing the
product. This conclusion illustrates the above-noted sensitivity of welfare analysis of entry
in differentiated product markets to the consumer utility specification and, specifically, the
valuation ascribed to increasing product variety.
Whereas Lence et al. (2007) consider the benefits of collective action to introduce new,
differentiated products, Moschini et al. (2008) study the use of PDO and PGI as a collective
quality-certification device in a Mussa-Rosen vertical differentiation setting. Individual
producers who would produce H products cannot overcome the asymmetric information
problems in the final good market to credibly signal their products’ quality. In the absence
of collective action, these producers produce only L products; i.e., an inefficient pooling
equilibrium with adverse selection ensues.
Within PDO and PGI, producers share the fixed costs of promoting and certifying the
H product, and each bears a variable cost of monitoring and inspection that is proportional
to the level of production of the organization. The ability of the organization to provide
credible certification improves consumer welfare by enabling producers to avoid the
lemons problem and to achieve the welfare-enhancing separating equilibrium.
Although Lence et al. (2007) and Moschini et al. (2008) demonstrate how coalition
building and cost sharing can lead to welfare gains through PCMO, other recent work
shows how the tools made available to PCMO can be used to transfer surplus from
consumers to producers, with attendant welfare loss in quality-differentiated markets.
27
These criticisms in general are based upon a standard welfare analysis of cartelization of an otherwise competitive
industry. See Chalfant & Sexton (2002) for a summary of this criticism and citations.

Quality of an agricultural product is determined, at least in part, by nature through soil
and climate conditions and variations in temperature, sunlight, rainfall, and rates of pest
infestation. Thus, the prototype case in the general economics literature (e.g., Ronnen
1991, Crampes & Hollander 1995, and Ecchia & Lambertini 1997) of a vertically differ-
entiated product market in which firms choose a single quality level to produce in stage one
of a two-stage game is not very relevant when modeling agricultural markets.
A simple framework that reflects some basic realities of agricultural production is to
assume an exogenous total production, X, and an ex ante distribution of that production
between H product and L product, where g (1 g) is the ex ante share of L (H). Then let
L product be enhanced in quality or transformed to H product through a decreasing
returns technology, C(T), C0 (T) > 0, C00 (T) 0, where T is the amount of L product
transformed to H.28
Chalfant & Sexton (2002) show how the seemingly innocuous practice of setting and
enforcing grading standards in the presence of grading errors can enable PCMO to achieve
monopoly price discrimination in a vertically differentiated market characterized by

this production structure. By eliminating informational asymmetries, grading creates prod-
uct differentiation in the eyes of consumers, enables a separating equilibrium to obtain,
and allows producers to charge a premium, rðQH Þ > 0, r0 ðQH Þ < 0, for their H produc-
tion, where QH ¼ ð1 gÞX þ T is the total quantity of H product on the market. However,
in the presence of grading error, consumers’ incremental willingness to pay for product
graded as H is diminished because such product may be contaminated by L product.
This reduction in the price premium for H product reduces competitive farmers’ incentives
to transform L product to H product. But this is precisely what is required in most
cases to practice third-degree discrimination because, for a given price level, H product
will normally have a less elastic demand than does L product.29 The competitive
equilibrium and welfare-maximizing production of H product is determined by the condi-
tion rðTjð1 gÞXÞ ¼ C0 ðTÞ, but the industry profit maximum is determined by the condi-
tion MRðTjð1 gÞXÞ ¼ C0 ðTÞ, where MR() is the marginal revenue from transformation
and MRðTjð1 gÞXÞ < rðTjð1 gÞXÞ. Under perfect grading, competitive producers
produce too much H product relative to the amount that maximizes industry profits,
but strategic grading error, by reducing r(), can enable the industry profit maximum
(with attendant deadweight loss to society) to be attained through the actions of competi-
tive producers.
Grading error in Chalfant & Sexton (2002) plays a similar role to untruthful labeling in
Giannakas (2002) and Giannakas & Fulton (2002). Each approach makes clear that a pure
separating equilibrium, in which product types are known with certainty, and a pure
pooling equilibrium, in which product types cannot be discerned, are polar cases, with a
continuum of intermediate cases existing in between, depending upon the accuracy of the
grading or certification process. Importantly, as Chalfant & Sexton demonstrate, the
profits to the members of PCMO are unlikely to be maximized at the pure separating
28
Examples of quality-enhancing activities include applying pesticides to reduce pest damage, thinning trees to
increase fruit size, and pruning canopy to enhance color.
29
This relationship between the H and L demands results automatically when demand is modeled in the Mussa-
Rosen framework. An intuitive example is designation of H product for fresh market consumption, whereas
L product is assigned to a processing use; the fresh market demand is invariably inelastic relative to demand for the
processed product.
356 Saitone Sexton

equilibrium. Therefore, PCMO in general have incentives to adopt imperfect certification
mechanisms, which will entail higher total welfare than is available in the pooling equilib-
rium but lower welfare than would occur in the pure separating equilibrium. However,
also applicable here is Lence et al.’s (2007) argument: The costs associated with perfect
grading or certification may exceed the benefits, so grading or certifying with error, which
is both cheaper and generates higher revenues, is implemented voluntarily through a
PCMO when perfect grading or certification is not.
Grading or certification schemes segregate product according to quality differences and
create differentiated products. An alternative and additional choice open to many PCMO
is whether to impose a MQS. In an asymmetric information environment, a MQS, by
prohibiting the sale of L product, is a blunt instrument to achieve the separation of
H product from L product (Leland 1979). This separating equilibrium differs from the classic
separating equilibrium in which both H product and L product remain on the market because
the MQS eliminates consumers’ self-selection between H product and L product.

The types of product attributes regulated through MQS in agricultural markets are,
however, often search attributes readily observable to consumers (e.g., size, color, blem-
ishes, and other cosmetic defects) or to market intermediaries through testing, such as
percent damage due to pest infestations (Starbird 1994), making information between
buyers and sellers symmetric (Bockstael 1984, Chambers & Pick 1994). Whereas earlier
studies had attempted to analyze MQS using a single overall demand curve for the com-
modity (Shafer 1968, Jesse 1979), Bockstael (1984) used a system of interrelated compen-
sated demand functions for different quality levels of the same basic product to show that,
when consumers have perfect information about product quality, the imposition of a MQS
necessarily harms consumers and reduces net social welfare.
Saitone & Sexton (2010) extend Bockstael’s analysis by imposing structure on the
quality-differentiated demands via the Mussa-Rosen specification and by studying the
decision by a PCMO whether to impose a MQS on the basis of a profit criterion. Produc-
tion is based upon the supply specification of Chalfant & Sexton (2002), and farmers make
quality-enhancement decisions independently and competitively. Even though MQS cause
the destruction of valuable L product (a result that never happens in nonagricultural anal-
yses of MQS), a profit-maximizing PCMO may nonetheless elect to impose a standard to
eliminate consumers’ ability to self-select between H product and L product, a factor that
restrains pricing of the H product. Any MQS that a competitive industry imposes on the
basis of a profit criterion causes the welfare of all consumers and overall welfare to decline
due to two deadweight losses—one from excessive enhancement of L product to H product
and the other from the destruction of valuable L product.30
MQS adoption can be considered in conjunction with grading and certification.
A PCMO that can segregate product quality types through grading or certification may
have an incentive to eliminate the L types from the market via a MQS. This result is a direct
consequence of the fact that the separating equilibrium with consumer self-selection
between H and L products may yield less producer profit than an equilibrium in which
only the H product is sold.
STE are usually, although not always, agencies of the national government. STE operate
as single-desk sellers for exports and in some cases also control sales to the domestic
30
Despite these negative welfare effects, Saitone & Sexton (2010) show that MQS may be preferred relative to direct
volume control on the basis of a social-welfare criterion as a second-best tool to transfer income to farmers.

market.31 Especially in developed countries, selling STE are charged to act in the best
interest of domestic producers and to operate under producer control or considerable
producer input, thus justifying their classification as PCMO.32
A rather extensive literature on STE has tended to assume homogeneous products and
to treat countries as players in oligopoly and oligopsony games, even in cases in which the
country has no state trader.33 Only recently have researchers begun to focus on the role of
STE in creating and exploiting quality differentiation.
A key paper in this realm is Lavoie (2005), who argues convincingly that quality
differentiation is important in the world wheat market. She then uses a vertical differenti-
ation framework to study competition between the United States and Canada, where
Canadian wheat is marketed under the auspices of the Canadian Wheat Board (CWB).34
Lavoie frames demand in the context of millers seeking to blend low-quality domestic
wheat with higher-quality imported wheat to produce a desired end product. Due to their
differentiated products, the United States and Canada each face downward-sloping
demand curves from importing countries. Lacking a single-desk selling authority, the
United States is unable to exploit this demand in Lavoie’s model, but the CWB price
discriminates among importing countries subject to the constraint on sales imposed by the
exogenous Canadian harvest. Empirical evidence supports the hypothesis of price discrim-
ination by the CWB.
Lavoie (2005) illustrates the importance of analyzing a key policy issue using a model
that acknowledges the market’s fundamental departures from perfect competition. The
CWB has long been controversial; the key question involves the benefits and costs from
monopoly selling through the CWB versus a system of private traders. Canadian wheat
generally sells for a premium, but without a model of product differentiation, it is impos-
sible to determine the extent to which this premium is due to the high quality of Canadian
wheat and would be earned under any marketing system or to the market power exercised
through the sole-selling authority of the CWB.
The relationship between selling STE and the upstream farm sector is important. Early
papers on STE in the grain trade tended to pay little attention to this aspect, focusing
instead on demand-side interactions between countries and assuming that stockholding
could be used to calibrate production with sales. Because STE do not directly regulate farm
production, a straightforward approach is to treat farm production as a constraint in the
STE’s objective function, as in Lavoie (2005). However, recent papers argue that it is better
to exploit the vertical linkage between a STE and upstream producers. Hamilton &
Stiegert (2000, 2002) and Dong et al. (2006) ascribe strategic importance to the payment
system utilized by STE, such as the CWB. Farmers receive an initial payment that is often
31
STE also act as monopsony importers for staple agricultural commodities, especially in Asian countries
(McCorriston & MacLaren 2007). Given our focus on PCMO, we do not address importing STE.
32
The objective is more complex in developing countries, where consumer welfare and tax revenues may play a
prominent role in STE decision making (Beghin & Karp 1991, McCorriston & MacLaren 2007). Cárdenas (1994)
suggests that price stabilization is a key goal in developing countries, where income risk may be a dominant
consideration.
33
Sexton & Lavoie (2001) summarize this literature; see also McCorriston & MacLaren (2005) for a recent
treatment.
34
Lavoie (2005) credits the high quality of Canadian wheat to the varietal control program imposed by the CWB.
The Neepawa variety is the standard for Canadian Western red wheat. For a new Canadian Western red wheat
variety to be registered and marketed, its quality must be equal to or better than that of Neepawa. In essence, the
quality characteristics of the Neepawa variety function as a MQS for Canadian wheat.
358 Saitone Sexton

less than the open-market valuation. An additional payment(s) is subsequently made on the
basis of revenues from marketing the crop. These authors argue that by purposefully
setting the initial payment low (at less than producers’ marginal costs) in stage 1, the STE
is able to gain strategic advantage and capture rents in the subsequent competition in the
export market (stage 2). Specifically, the low procurement price represents a commitment
device, enabling the STE to act as a Stackelberg leader in stage 2, closely analogous to the
role that an export subsidy plays in the classic analysis of Brander & Spencer (1985).
The credence of this approach rests on decisions being a function of the initial transfer
price, and not the anticipated final price, which would include producer expectations of
subsequent payments. Subsequent payments are treated as lump sum in the conceptual
modeling, but in reality they are patronage based, and therefore decision makers may
account for them in expectation in valuing wheat input costs. Hamilton & Stiegert (2002)
find empirical support for the rent-shifting hypothesis regarding the behavior of the CWB
in the international market for durum wheat, but Dong et al. (2006) find little support for
it in a differentiated product model for trade in malting barley that involved differentiated
product competition among the CWB, the Australian Barley Board (another STE), and a
third composite trader.35
The increasing importance of quality in the food system has not been lost on marketing
cooperatives, and new cooperatives have appeared to exploit quality-based market niches
(Fulton & Sanderson 2002). However, various traditional cooperative business practices
and the voluntary nature of cooperative membership are not conducive to success in
meeting consumers’ demands for quality (Mérel et al. 2009). For example, the revenue
pooling practices of cooperatives generally fail to adequately reward producers of the
highest-quality products, causing an adverse selection problem, with attendant reductions
in product quality and/or the exit from the cooperatives of the H producers.
Although investments to create differentiated products (Lence et al. 2007) or to certify
product quality (Moschini et al. 2008) may be facilitated through collective action in a
cooperative, incentives to underinvest on the basis of traditional cooperative financing
principles (known as the horizon problem) are pervasive. The incentive to supply L product
to a cooperative pool and the incentive to limit capital investments are both examples of the
free-rider problems that beset cooperatives (Cook 1995) and create an economic rationale
for the mandatory programs that are discussed here. These factors, when viewed through
the prism of the modern agriculture sector, have led to pessimism regarding the ability of
producer marketing cooperatives to compete and survive (Coffey 1993, Fulton 1995).
Despite the key role of cooperatives in food marketing and the importance of quality
and product differentiation in modern food markets, most models of cooperative behavior
to date have assumed homogeneous products. Among the exceptions are Hoffman (2005)
and Saitone & Sexton (2009), who each apply the Mussa-Rosen framework to investigate
aspects of cooperatives’ behavior in a vertically differentiated market. Hoffman studies a
mixed-market model, wherein a cooperative competes with an investor-owned firm (IOF)
in a duopoly setting.36 In the first stage of the model, the firms compete in choice of a single
quality level to produce, and then they compete in price in stage 2. Farmers then produce
35
The strategic setting of initial payments as exemplified in this work represents yet another potential tool in the
arsenal of PCMO to collectively regulate the volume of production or its distribution across quality grades using less
overt tools than direct volume controls.
36
Such models have been studied in a homogeneous product setting (Tennbakk 1995, Albæck & Schultz 1998).

the product quality level determined by their processor’s stage 1 decision.37 The unique
feature of the model is that the linkage to the upstream farm sector must also be specified in
the cooperative’s objective function.
Whereas a fixed farm cost of meeting the stage 1 quality choice is ignored by an
IOF in its optimization, it is included in the cooperative’s stage 1 decision making. As a
result, a lower quality level is chosen, regardless of whether the cooperative ends up as the
H producer or the L producer. However, if variable costs are convex in quality, the opposite
result happens. The cooperative accounts for the farmers’ marginal cost function in its
optimization, whereas an IOF considers only the marginal cost evaluated at its stage 1
quality choice, i.e., the market price. Therefore, the cooperative recognizes lower variable
costs of quality than does an IOF, leading the cooperative to select a greater stage 1 quality,
ceteris paribus. Thus, in this model the effect of a cooperative on product quality hinges on
the nature of the cost function at the farm level. A disadvantage is that the model is
incapable of predicting which organizational type emerges as the H producer, and thus
the model does not speak to the question of cooperatives’ ability to compete favorably
against IOF competitors in the quality dimension.
In Saitone & Sexton (2009), product quality is determined at the farm level, not at the
processing stage (as in Hoffman 2005). Saitone & Sexton consider how cooperatives’
revenue pooling practices affect producers’ incentives to produce H products. Farmers are
homogeneous ex ante in their ability to produce H product but differ ex post due to
stochastic quality shocks. Quality enhancement is possible through the transformation of
L product to H product, as described above. Although revenue pooling fails to fully
compensate producers of H products, Saitone & Sexton demonstrate two offsetting bene-
fits. Pooling attenuates the incentive of competitive producers to produce too much
H product relative to the industry profit maximum, and it provides risk-averse farmers
with insurance against the stochastic quality shocks. Thus, despite the conventional wisdom,
the ability to pool revenues may create a strategic advantage for cooperatives.38
Adverse selection is not an issue in this model because farmers are identical in their
ability to produce H quality ex ante, and contracts are signed prior to the realization of the
stochastic shocks. If farmers differ ex ante in their ability to produce H product, as in Zago
(1999), then any implementable pooling arrangement must be immune to defections by the
highest-ability farmers. The key is to recognize that pooling is not an all-or-nothing prop-
osition and that any degree of partial revenue pooling can be chosen. Revenue pooling
attenuates competitive producers’ incentives to produce too much H product in the same
way that imperfect grading (Chalfant and Sexton) or imperfect certification (Giannakas
2002, Giannakas & Fulton 2002) does, i.e., by diminishing the price premium earned for
H product relative to L product. Risk-averse farmers prefer full pooling (complete insur-
ance) in this model, but full pooling provides no incentives for quality enhancement,
meaning that partial pooling is often the optimal strategy. In the case of farmers who differ
ex ante in their ability to produce H products, partial pooling may be immune to defections
due to adverse selection, whereas full pooling is not.
37
This production framework is thus in rather stark contrast to the framework suggested by Chalfant & Sexton
(2002), which specifies that quality choices be made at the farm level on the basis of natural forces and quality-
enhancement decisions by farmers.
38
Notably, the supply-control aspect of pooling is vulnerable to free riding if farmers have an outside marketing
option, but the insurance aspect is not.
360 Saitone Sexton

Mixed-market models of cooperatives in competition with an IOF have also been
studied in a horizontal differentiation framework, but mainly in the context of consumer
cooperatives. Fulton & Giannakas (2001) investigate the role of consumers’ commitment
to the cooperative organizational structure. Given that consumers increasingly value a
broad portfolio of attributes in the food products they consume, it is reasonable that some
ascribe a value to consuming a product produced by a nonprofit cooperative. An IOF and a
cooperative produce a product with the same physical characteristics in this model but are
differentiated by their organizational identity. Consumers are characterized by a parameter
a distributed uniformly along [0,1]. Indirect utility from purchasing a unit from the coop-
erative (IOF) is UC ¼ U pC þ la (UI ¼ U pI þ mð1 aÞ), where l and m are nonnega-
tive constants that characterize the intensity of consumer preference for the organization
type they patronize.39
As usual, market demands are derived by finding the indifferent consumer with type a
such that
UC ¼ U pC þ la ¼ UI ¼ U pI þ mð1
aÞ:
Fulton & Giannakas (2001) focus on the case in which the cooperative is owned by the
consumers, and thus price is set to maximize consumer welfare subject to breaking even.
However, the model may readily apply to a marketing cooperative owned by upstream
farmers. In this case the cooperative price would be set to maximize profits, given l and m
and the pricing behavior of the IOF firm. Indeed, the authors solve this version of the
model but do not acknowledge that it represents the mixed-market equilibrium with a
marketing cooperative.40
Drivas & Giannakas (2008) modify the consumer cooperative model of Giannakas &
Fulton (2005) to study cost-reducing innovations in a mixed duopsony market in which
farmers, who each supply one unit, are distributed uniformly on Hotelling’s line and proc-
essing firms [one open-membership (OM) cooperative and one IOF] are located at each
endpoint. Processing firms face constant but possibly different selling prices. The firms
compete in price offered to farmers for the farm input. An innovative feature of the
approach is that the cooperative must finance its investment internally through retained
earnings. Thus, the model unfolds in three stages: preinnovation production (stage 1),
wherein the cooperative must raise revenues to finance the next stage, investment in cost-
reducing innovations (stage 2), and finally postinnovation production (stage 3). The coop-
erative has increased incentive to innovate relative to an otherwise identical IOF because it
internalizes the benefits of innovation to its farmer members upstream. However, an IOF’s
incentive to innovate is diminished when it competes with an OM cooperative, because the
postinnovation farm price is higher. The OM cooperative acts as a “yardstick of competi-
tion” (Nourse 1922), causing higher farm prices in both the preinnovation competition
and the postinnovation competition relative to the pure duopsony case.
39
An alternative specification would be to allow two consumer types, as in the Crespi & Marette (2003b) model,
because many consumers would be indifferent (or ignorant) regarding the organization type of the firm they
patronized.
40
An interesting extension pursued briefly by Fulton & Giannakas (2001) is to consider l as endogenous in a prior
stage of the game, when it can be influenced either by the cooperative’s past behavior (i.e., a reputation can be
established) or by prior investments in, e.g., advertising. Indeed, advertisements by marketing cooperatives to
emphasize their farmer ownership are common and readily interpreted within the Fulton & Giannakas framework.

Mérel et al. (2009) also use the horizontal differentiation model to study cooperatives’
membership policies in a mixed market. However, instead of farmers being located
along Hotelling’s line, the final-product consumers are. OM may be a disadvantageous
policy for cooperatives in modern food markets because it removes a cooperative’s ability
to regulate the amount and quality characteristics of product that is processed and
marketed. Control over quantity and quality seems necessary for a cooperative operating
in a differentiated product market. Yet OM is required under law in some countries, most
notably in the EU.
Duopoly processors (one IOF, one cooperative) are located at the endpoints of
Hotelling’s line, and Mérel et al. (2009) compare equilibrium when the cooperative has an
OM policy versus a closed-membership (CM) policy. A key feature of the model reflective
of most food markets is that total production of the farm product exceeds the total demand
in the branded market as denoted by Hotelling’s line. Thus, some production must be sold
into an unbranded, competitive market at fixed price. An OM cooperative pays a pooled

price for the product it receives, reflecting returns in the branded and competitive market.
Given that the branded market returns higher value than the competitive market, no
producer will wish to sell solely into the competitive market. Thus, all farmers who do
not sell to the branded-product IOF sell to the cooperative.
The OM cooperative, because it takes all comers, also acts as a yardstick of competition
in this model, forcing the IOF to match its price to acquire any product. A CM cooperative,
however, does not operate in the nonbranded market. It chooses membership and produc-
tion to maximize the price it pays to farmers for the raw product. Returns in the branded
market are not dissipated by participation in the outside market in the CM cooperative,
but such a cooperative also fails to act as a yardstick of competition because the IOF need
merely pay the value of the farm product in the unbranded market to attract patronage.
Thus, from a policy perspective, the requirement of OM has a rationale in that the presence
of the cooperative raises the income of all farmers. But the risk is a familiar one; dissipation
of returns from producing the branded product may mean that rents are insufficient to
justify the upfront costs required to create the product.
CONCLUSION
Modern food consumers increasingly value a diverse portfolio of product attributes, mak-
ing quality, in its many dimensions, and product differentiation critical aspects of modern
food markets. This revolution in food product quality and differentiation presents many
important research questions that cannot be studied with a model of perfect competition
because the axiom of homogeneous product is violated, as in many cases is the axiom of
perfect information.
Credible certification mechanisms are needed to solve inherent adverse selection prob-
lems that, unresolved, can undermine firms’ attempts to provide the demanded quality
attributes. Many key issues surround certification: What represents a credible signal?
Who should provide it? Who should pay for it? How should it be financed? What if it is
conducted subject to error? Although considerable progress has been made in answering
these questions, more work remains to be done. Although good work has been done
applying the Mussa-Rosen framework to these questions, it may be too limiting in some
cases. The two-point (high or low) unidimensional distribution of quality belies that many
attributes have a continuous distribution and that multiple differentiating attributes are
362 Saitone Sexton

common. Similarly, the pervasive depiction of firms producing only a single quality level is
limiting and unrealistic.
Although differentiating products and exploiting market niches are keys to success in
modern food markets, there are barriers to achieving these outcomes. In addition to
establishing the credence of differentiating attributes, there are often substantial fixed costs
that may be beyond the reach of individual producers or even groups of producers. Pro-
ducer-controlled marketing organizations provide potential solutions. Recent research
demonstrates that they can play a key role in sharing fixed costs of innovation and
certification, influencing the distribution of product quality in the market, and regulating
supplies so as to exploit differentiation-induced, downward-sloping demand curves. These
insights were attained through analysis of models that depicted these organizations in
differentiated product markets, in contrast to traditional models that depicted them as
cartels in homogeneous product markets.
Producer-controlled marketing organizations are a diverse lot, and the legal frameworks
within which they operate vary widely across countries. More understanding is needed as
to the benefits and costs of restrictions on these organizations’ behavior and how the
multiple tools often at their disposal interact to influence market outcomes. The need to
create differentiated products and to influence and certify product quality has created new
roles for producer marketing organizations that we need to better understand.
We hope this review is helpful in synthesizing results and drawing conclusions for
researchers working in the field and for providing a point of entry for newcomers. We are
optimistic that the progress of recent years has set the stage for even greater successes
moving forward.
DISCLOSURE STATEMENT
The authors are not aware of any affiliations, memberships, funding, or financial holdings
that might be perceived as affecting the objectivity of this review.
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368 Saitone Sexton

Annual Review of
Resource Economics
Volume 2, 2010 Contents
Prefatory
On the Increasing Role of Economic Research in Management of Resources and

Protection of the Environment

William J. Baumol . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Modeling Choices Under Economic and Health Risks

Empirical Challenges for Risk Preferences and Production
David R. Just, Sivalai V. Khantachavana, and Richard E. Just . . . . . . . . . . 13
Real Options in Resource Economics
Esther W. Mezey and Jon M. Conrad . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Economics of Health Risk Assessment
Erik Lichtenberg . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Invasive Species and Endogenous Risk
David Finnoff, Chris McIntosh, Jason F. Shogren, Charles Sims, and
Travis Warziniack . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
Managing Infectious Animal Disease Systems
Richard D. Horan, Eli P. Fenichel, Christopher A. Wolf, and
Benjamin M. Gramig . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101
Antibiotic Effectiveness: New Challenges in Natural Resource Management
Markus Herrmann and Ramanan Laxminarayan . . . . . . . . . . . . . . . . . . . 125
Measuring the Benefits of Economic and Environmental Amenities

The Life Satisfaction Approach to Environmental Valuation
Bruno S. Frey, Simon Luechinger, and Alois Stutzer . . . . . . . . . . . . . . . . . 139
The Benefit-Transfer Challenges
Kevin J. Boyle, Nicolai V. Kuminoff, Christopher F. Parmeter, and
Jaren C. Pope. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 161
viii
Consumer Surplus with Apology: A Historical Perspective on Nonmarket
Valuation and Recreation Demand
H. Spencer Banzhaf . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 183
What Have We Learned from 20 Years of Stated Preference Research in
Less-Developed Countries?
Dale Whittington . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 209
Providing Safe Water: Evidence from Randomized Evaluations
Amrita Ahuja, Michael Kremer, Alix Peterson Zwane . . . . . . . . . . . . . . . 237
Climate Change and Global Resources

Costs of Mitigating Climate Change in the United States

Niven Winchester, Sergey Paltsev, Jennifer Morris, and John Reilly . . . . . 257
Innovation and Climate Policy

David Popp . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 275
Economic Incentives and Global Fisheries Sustainability
Christopher Costello, John Lynham, Sarah E. Lester, and
Steven D. Gaines . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 299
Public Policy: The Environment and Agriculture

Regulatory Environmental Federalism
Bouwe R. Dijkstra and Per G. Fredriksson . . . . . . . . . . . . . . . . . . . . . . . 319
Product Differentiation and Quality in Food Markets:
Industrial Organization Implications
Tina L. Saitone and Richard J. Sexton . . . . . . . . . . . . . . . . . . . . . . . . . . . 341
Agricultural Labor and Migration Policy
J. Edward Taylor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 369
Errata
An online log of corrections to Annual Review of Resource Economics articles
may be found at http://resource.AnnualReviews.org
Contents ix
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ANNUAL

REVIEWS Further Product Differentiation and

• Our comprehensive search

Tina L. Saitone1 and Richard J. Sexton1,2

Annu. Rev. Resour. Econ. 2010. 2:341–68 Key Words

342 Saitone Sexton

summarize empirical evidence regarding imperfect competition in agricultural trade.

An important and growing area of industrial organization research in agricultural markets

www.annualreviews.org Differentiation and Quality in Food 343

MODELING PRODUCT AND QUALITY DIFFERENTIATION IN

with those located adjacent to it in the product characteristic space.

344 Saitone Sexton

Address Models of Product Differentiation

a high-quality rating, whereas consumers with lower valuations of quality purchase

All consumers with y > y strictly prefer to purchase the H product.

www.annualreviews.org Differentiation and Quality in Food 345

Generalization to more than two products and qualities is straightforward.

of product is H (e.g., GMO free). Then q

price, and pooled demand is

346 Saitone Sexton

U0 tjy qi j and surplus CSðy, qi , t, Pi Þ ¼ Uðy, qi , tÞ Pi if she purchases a unit from

www.annualreviews.org Differentiation and Quality in Food 347

represents a policy choice designed to influence firms’ subsequent behavior.

Nonaddress Models of Product Differentiation

348 Saitone Sexton

FOOD PRODUCT QUALITY, CERTIFICATION, AND LABELING

www.annualreviews.org Differentiation and Quality in Food 349

equilibrium results, as depicted in Equation 1, wherein quality of products is known and

350 Saitone Sexton

www.annualreviews.org Differentiation and Quality in Food 351

differentiated product market via certification. Consumers have Mussa-Rosen preferences,

352 Saitone Sexton

www.annualreviews.org Differentiation and Quality in Food 353

product requirements intended to create product differentiation (Ackerman et al. 1997,

354 Saitone Sexton

www.annualreviews.org Differentiation and Quality in Food 355

monopoly price discrimination in a vertically differentiated market characterized by

356 Saitone Sexton

the MQS eliminates consumers’ self-selection between H product and L product.

www.annualreviews.org Differentiation and Quality in Food 357

358 Saitone Sexton

www.annualreviews.org Differentiation and Quality in Food 359

360 Saitone Sexton

www.annualreviews.org Differentiation and Quality in Food 361

into an unbranded, competitive market at fixed price. An OM cooperative pays a pooled

362 Saitone Sexton

www.annualreviews.org Differentiation and Quality in Food 363

Agric. Econ. 84:53–66

364 Saitone Sexton

Fulton M, Giannakas K. 2001. Organizational commitment in a mixed oligopoly: agricultural coop-

www.annualreviews.org Differentiation and Quality in Food 365

366 Saitone Sexton

Nelson P. 1970. Information and consumer behavior. J. Polit. Econ. 78:311–32

www.annualreviews.org Differentiation and Quality in Food 367

368 Saitone Sexton

Volume 2, 2010 Contents

On the Increasing Role of Economic Research in Management of Resources and

Protection of the Environment

Modeling Choices Under Economic and Health Risks

Measuring the Benefits of Economic and Environmental Amenities

Climate Change and Global Resources

Costs of Mitigating Climate Change in the United States

Innovation and Climate Policy

Public Policy: The Environment and Agriculture

Editor: Stephen E. Fienberg, Carnegie Mellon University